Campbell Soup adjusted profit up 6 pct in the slow soup season; outlook spooks investors

Campbell Q4 profit up; outlook sends shares down

CAMDEN, N.J. — The Campbell Soup Co. reported a larger fourth-quarter net income Friday, a time when the temperature rises and its soup sales traditionally drop.

Yet shares slid in early trading after the company predicted sluggish sales ahead.

Sales dipped by 1 percent in the most recent quarter, which Campbell was able to offset with better margins. The company topped Wall Street’s profit expectations by 2 cents per share.

Sales of both condensed and ready-to-serve soups slid by 7 percent, even as the company boosted advertising.

“In a challenging year, we delivered strong earnings growth, overcoming softer-than-expected sales, particularly in our U.S. soup business,” said President and CEO Douglas Conant. “We had another year of strong cash flow performance, generating more than $1 billion in cash flow from operations. For the year, we expanded gross margins through supply chain productivity improvements and previously announced cost-savings initiatives.”

Net income rose 63 percent to $113 million, or 33 cents per share, compared with $69 million, or 20 cents per share in the same period last year. Excluding one-time items from 2009, including a charge for nontangible assets, profit rose 7 percent.

Sales for the quarter were $1.52 billion, down 1 percent.

Fourth-quarter sales numbers for soup aren’t a good indicator of the company’s health because of the relatively small sample size for a period that covers most of the summer, according to Campbell.

The company has maneuvered to wring out larger profits even as consumers pull back on spending where they can.

When a $14 million gain from commodity hedging last year is removed, the company’s gross margin was 40.6 percent, better than the 40.4 percent reported during the same period in 2009.

Bright spots included sales of beverages, including V8 vegetable juices, and the company’s baking and snack lines.

Beverage sales rose 12 percent, Campbell said. And thanks to a more frugal consumer, broth sales were also up 3 percent as more people cooked at home.

Campbell also said it expects per-share profit to rise 5 percent to 7 percent in 2011. That’s in line with its long-term targets. But the company cited challenging conditions for its conservative sales growth expectations of 2 percent to 3 percent.

That was the number many investors focused on and shares fell $1.22 to $36.10 in early trading.

For the full fiscal year, Campbell reported earnings of $844 million or $2.42 per share, up from $736 million or $2.05 per share in fiscal 2009. Excluding one-time items, the full-year profit was $862 million, or $2.47 per share, up from $794 million or $2.21 per share.